To prepare for tax changes in early 2025, consider the following steps:
- Stay informed: Keep track of legislative developments and potential changes to the Tax Cuts and Jobs Act (TCJA) provisions. It’s set to expire at the end of 2025 which could cause anxiety with the 2026 tax filing season right around the corner.
- Understand the potential changes:
- Individual tax rates may revert to pre-TCJA levels, with a top rate of 39.6%.
- Standard deductions could decrease to pre-TCJA levels.
- The pass-through income deduction (Section 199A) may expire.
- Changes to itemized deductions, including SALT and mortgage interest.
Financial Planning:
- Review your current tax situation and project how potential changes might affect your bottom number (net income disbursement).
- Consider accelerating income or deferring deductions if tax rates are likely to increase (update form W4 or access your employee self-service portal to make estimated additional withholdings).
Business & Supplemental Income Planning:
- Work with tax advisors to model various scenarios based on potential legislative outcomes.
- Develop strategies to mitigate potential tax increases.
Follow policymakers:
- Consider following lawmakers to stay up-to-date with potential changes that might affect your business or industry of work.
- Stay engaged in the policy-making process through industry associations or direct outreach.
Flexibility in planning:
- The results of the 2024 elections will significantly influence tax policy direction, so stay attuned to political developments.
Cash flow management:
- Prepare for potential changes in tax liabilities by adjusting cash flow projections and budgets.
Education and communication:
- Ensure key roles in your organization understand the potential impacts of tax changes which would impact your payroll cycles.
- Develop a communication strategy to keep informed.
By taking these proactive steps, you can better position yourself or your business to navigate the potential tax changes coming in early 2025. Remember that tax laws are complex and subject to change, so it’s crucial to engage early for personalized advice.